Last week I wrote about how Tim Geithner was rolled by the big New York Banks into buying out their AIG Credit Default Swaps at Par. And then on Friday came the Paul-Grayson bill to Audit the Fed. But in all the reporting I have read on the AIG Bailout, not a single reporter has mentioned the elephant in the room. The Federal Reserve Bank of New York is owned by the big New York Banks. As the Fed’s website explains, “The twelve regional Federal Reserve Banks, which were established by Congress as the operating arms of the nation’s central banking system, are organized much like private corporations.” Every bank in New York owns a proportional amount of stock in the New York Fed, which pays them a guaranteed 6% coupon. So therefore, Tim Geithner was essentially employed by the banks that he then bailed out by taking over AIG.
The average citizen has no idea that the Federal Reserve Bank of New York is a private corporation owned by JP Morgan Chase, Goldman Sachs and Morgan Stanley. Keep reading →
The lead story in the New York Times this morning carries the breathless headline “Wave of Debt Payments Facing U.S. Government”. It could have been written by the head of the government bond trading desk at Goldman Sachs, and yet the byline contains the name Edmund Andrews, supposedly one of the savvier economists writing for the Times. Here again, the Establishment lackeys in the Press are carrying the water for Wall Street and the big bond holders (PIMCO’s Bill Gross is quoted talking about storing nuts for the winter). Not until the 12th paragraph of his story does Andrews drop this little morsle.
So far, the demand for Treasury securities from investors and other governments around the world has remained strong enough to hold down the interest rates that the United States must offer to sell them. Indeed, the government paid less interest on its debt this year than in 2008, even though it added almost $2 trillion in debt.
The government’s average interest rate on new borrowing last year fell below 1 percent. For short-term i.o.u.’s like one-month Treasury bills, its average rate was only sixteen-hundredths of a percent.
For me the most distressing aspect of American politics over the last 30 years is the realization that the Washington Establishment really does rule the country no matter which party holds the White House or Congressional majorities. Progressives suffered through 12 years of Republican presidents after Reagan’s election only to realize that the election of Bill Clinton changed nothing. The military budget didn’t shrink, deregulation of business oversight continued apace, alternative energy strategies sat on the shelf. Now we have to suffer through watching Larry Summers and Tim Geithner lead Obama down the primrose path to disaster while the financial elites take home record bonuses.
As some of our correspondents have suggested, the split we may be seeing is not between liberals and conservatives, but between insiders and outsiders–the Establishment vs the People.
So yesterday the outsiders won an important, but little noticed victory (it did not even deserve a headline on the NYTimes.com politics page). Representatives Ron Paul and Allan Grayson managed to pass out of the House Financial Services Committee a bill to audit the Federal Reserve, despite the strenuous objections of Barney Frank, Ben Bernanke, Mel Watt (Bank of America’s congressman) and the Washington Establishment. Keep reading →
Carl Levin, chairman of the Senate Armed Services Committee, said higher-income Americans should be taxed to pay for additional troops sent to Afghanistan and that NATO should provide half of the new soldiers.
I can’t wait for Rush Limbaugh and Glenn Beck to start a 9/12 Protest about the War Tax on their multi-million dollar paychecks.
I went to a screening of Crazy Heart last night. It stars Jeff Bridges, as a washed up drunk country music star, who through love and tragedy gets his life and his ability to create back in hand. It’s produced by our friend T-Bone Burnett (among others) and the soundtrack features some extraordinary songs by Bone and the last work of our dear departed Stephen Bruton. It’s the first directorial effort for an actor named Scott Cooper, and it’s a stunning debut. Jeff Bridges is going to finally win an Oscar (he’s been nominated four times) for this work, which will make your heart sing and break at the same time. And for me, Crazy Heart is right up there with Where The Wild Things Arefor Best Picture.
1. Enthusiasm. People tend to see electorate through a one-dimensional lens, in which a fixed number of voters are trying to decide between two or more candidates. But that’s not really how politics works, especially in primaries. Rather, the playing field is (at least) two-dimensional: people are not merely trying to decide whom to vote for, but also whether to vote at all. Because of the reach of her brand, Palin has the ability to engage the sorts of voters who might ordinarily stay at home. In the general election, that will include some voters who turn out to vote against her — but that’s less of a concern in the primaries.
7. There are virtually no moderates left in the Republican base. Although, there may be a significant number of independents voting in some of the primary states, which makes things marginally harder for Palin than in election where many independents were sucked into the Democratic primaries.
I think Silver has a good point and I think Palin is going to run and could very well win the nomination. An Obama vs. Palin race would be great for the country. No more of this pretending that the Republican Party is a “big tent” with squishy moderate candidates like John McCain or the pretense of Bush’s “compassionate conservatism”. Let’s decide–are we a progressive country or a conservative country?
Just two days before the New York Fed paid A.I.G.’s partners 100 cents on the dollar to tear up their contracts with the insurance giant, one bank volunteered to take a modest haircut — but it never got the chance.
UBS, of Switzerland, alone offered to give a break to the New York Fed in the negotiations last November over how to keep A.I.G. from toppling and taking other banks down with it. It would have accepted 98 cents on the dollar.
But UBS’s good-faith gesture was quickly drowned out by Goldman Sachs and the top French bank regulator. They argued, with others, that it would be improper and perhaps even criminal to force A.I.G.’s trading partners to bear losses outside of bankruptcy court.
Two stories on the front page of the New York Times this morning reminded me of a historical precedent that may be useful to recall. The first story relates the increasing cost of deploying a single additional American soldier to Afghanistan.
The latest internal government estimates place the cost of adding 40,000 American troops and sharply expanding the Afghan security forces, as favored by Gen. Stanley A. McChrystal, the top American and allied commander in Afghanistan, at $40 billion to $54 billion a year, the officials said.
Even if fewer troops are sent, or their mission is modified, the rough formula used by the White House, of about $1 million per soldier a year, appears almost constant.
When President Obama visits China for the first time on Sunday, he will, in many ways, be assuming the role of profligate spender coming to pay his respects to his banker. That stark fact — China is the largest foreign lender to the United States — has changed the core of the relationship between the United States and the only country with a reasonable chance of challenging its status as the world’s sole superpower.
The historical analogy is to the city-state of Florence at the beginning of the 15th Century. Keep reading →
Since we have a bunch of guitar players and even a guitar maker on this blog, I thought everyone might appreciate a New Yorker piece about Robert Earl Keen visiting the Mandolin Brothers guitar store in New York. You should read the whole piece but the ending probably feels familiar to a few of you.
Finally, Jay handed Keen a Martin 000-45, one of only two hundred and sixty-five ever made, from 1930. Keen strummed it once, cocked his head, and then asked for a pick.
“You know what I said about some guitars just having songs in them?” he said. “This is one of them.” Keen’s fingers moved over the strings, but the rest of him seemed to float toward the ceiling.
“How much?” he asked, when he’d finished playing.
“Sixty-five thousand.”
“Damn, I always go for the most expensive guitar in the place, and after that nothing else sounds as good.”
Jay said the guitar was on hold for someone else, but “I could notify you if he doesn’t want it.”
“Yeah, right. Maybe you could also notify my banker.”
“Certainly,” Jay said. “And your wife. I’m good with wives. Do you want to call her now?” Jay pointed toward the phone in the next room. But Keen knew better than to follow him there.
Former four star General Karl Eikenberry, who serves as President Obama’s ambassador to Afghanistan has weighed in on the troop build-up.
The U.S. ambassador in Kabul sent two classified cables to Washington in the past week expressing deep concerns about sending more U.S. troops to Afghanistan until President Hamid Karzai’s government demonstrates that it is willing to tackle the corruption and mismanagement that has fueled the Taliban’s rise, senior U.S. officials said.
A four star dissenting from the Petraeus/McChrystal party line has really frosted some folks at the Pentagon. But Obama seems to be listening to Eikenberry.
Jon Taplin is a Professor at the USC Annenberg School for Communication. He has produced film, music and television with Martin Scorsese, George Harrison, Bob Dylan and The Band among others.
Last week I wrote about how Tim Geithner was rolled by the big New York Banks into buying out their AIG Credit Default Swaps at Par. And then on Friday came the Paul-Grayson bill to Audit the Fed. But in all the reporting I have read on the AIG Bailout, not a single reporter has mentioned the elephant in the room. The Federal Reserve Bank of New York is owned by the big New York Banks. As the Fed’s website explains, “The twelve regional Federal Reserve Banks, which were established by Congress as the operating arms of the nation’s central banking system, are organized much like private corporations.” Every bank in New York owns a proportional amount of stock in the New York Fed, which pays them a guaranteed 6% coupon. So therefore, Tim Geithner was essentially employed by the banks that he then bailed out by taking over AIG.
